China is the latest super power to start to feel the effects of a long two years of supply chain issues and dwindling economies because of the covid pandemic.
The Russia-Ukraine conflict is adding stress to global food supplies, oil and gas both have run away prices, U.S inflation is the highest it’s been in 40 years – now China, who was relatively unscathed, is currently fighting against its own crises.
Covid-19 has re-emerged in China and cases are surging in four of the country’s largest cities Beijing, Tianjin, Shanghai and Chongqing, as well as sixteen provinces according to the National Health Commission.
So the Chinese defaulted to the same old thing that everyone has been doing but never helped – the Chinese Communist Party is locking down again.
The city of Shenzhen, which is home to roughly q7.5 million people and famously known as China’s “Silicon Valley,” has been completely shut down apart from “essential services” and anyone that provides fuel, food or necessities.
All other businesses were ordered to close and their staff must work from home, including Apple’s Foxxcon, which manufactures the iPhone.
Shenzhen also has the fourth-largest seaport in the world, so it’s safe to say that supply chains are about to be dealt yet another blow and adding to that coming supply chain disaster is Russia and Ukraine’s seaports being closed due to the war.
The Chinese stock market is also suffering, as the Hang Seng tech index, ranked 61 percent from 2021 when it was at its peak. The Nasdaq Golden Dragon China Index of U.S traded stocks, fell by 69 percent. The index hit 72 percent in the 2008 crash, which caused a global financial crisis.
The Securities and Exchange Commission listed five Chinese companies that were risking being delisted because they refuse to show their books to U.S auditors, as a result, the market plunged 10 percent in a day, the worse it’s been since 2008.
Paul Pang of Pegasus Fund Managers Ltd., said in an interview with Bloomberg, “The market is very panicky.” Pang has sold off the majority of his stake in Alibaba Group.
“Sanctions against China are not impossible if China refuses to take sides in the war in Ukraine. Tech shares are among those risky names exposed in the crossfires in the rising Sino-U.S. tensions.”
Zero Hedge has also reported that the real estate market in China is tanking, thanks to China’s junk bonds sector continues to spiral, reporting:
“China credit stress reached new extremes in the offshore, USD market, where average junk yields rose above 25% meaning the primary market won’t function properly anytime soon,” Zero Hedge explained, adding: “Contagion has transformed stronger property developers into risky bets.”
The world financial systems are on the verge of collapse and it is something that will be felt through generations to come.
China’s once strong property market, has been plagued by loan defaults from at least 14 real estate developers – after China tightened rules on borrowing and excessive speculation – and the biggest of all was China Evergrande, which crashed in 2020.
The Chinese government is encouraging home buying in smaller cities by cutting mortgage rates and allowing developers access to bank loans; the strategy, however, hasn’t boosted the property market.
